The lack of transparency around financial institutions’ Net Zero targets and disclosures for portfolio alignment leaves a big opportunity for greenwashing. This could be addressed with better guidance on portfolio alignment metrics, as contained in a recent Glasgow Financial Alliance for Net Zero (GFANZ) report.  Financial institutions are being given substantial leeway on how to define their alignment with national Net Zero emissions targetsThis presents a loophole that could enable greenwashing unless more clarity is required on what makes for a credible Net Zero target or di...

Gulf Cooperation Council (GCC) syndicated loans (Islamic and conventional) had one of the strongest years in 2021.The total of GCC syndicated loans (denominated in US dollars) that was raised in 2021 reached a total of USD 104.4 billion, compared to USD 68.6 billion raised in 2020, according to Refinitiv.It should be noted that the number of deals has significantly increased from 54 in 2020 to 80 in 2021, according to Refinitiv data. Debt DealsWhat is more surprising to market observers was the fact that GCC borrowers preferred syndicated loans in 2021 (this came on the account of f...

The Private Department of Sheikh Mohamed Bin Khalid al-Nahyan LLC (PD), a United Arab Emirates- (UAE) based real estate firm, is resuming plans to offer benchmark-sized three-year Sukuk denominated in US dollars as shown in bank documents on the 12th of September 2022. Why it Matters? PD originally intended to raise USD 600 million in July 2021, but instead decided to size the deal at USD 350 million and then withdrew the deal after it launched and before pricing. The company would have likely faced a rating drop if the deal had closed at the indicated magnitude. Sheikh Moha...

Global sukuk issuance is anticipated to witness a decline from USD 181 billion in 2021 to between USD 160 billion and USD 170 billion in 2022, according to Moody’s Investors Service. Why it Matters?  The decline is anticipated since major sovereigns that issue Sukuk have improved budgetary circumstances as a result of higher oil prices and higher interest rates. Given the uncertainty of interest rates during the first half of 2022, some issuers, including corporations and financial institutions, have delayed their Sukuk sales. As major central banks continue to raise i...

Malaysia Building Society Berhad (MBSB) and Malaysian Industrial Development Finance Berhad (MIDF) are expected to submit a comprehensive merger proposal to the Central Bank of Malaysia, Bank Negara Malaysia (Bank Negara) in September 2022, paving the way for the nation's first merger of domestic financial institutions since November 2021.  Why it Matters? The merger, if completed, will make MBSB the nation's second-largest standalone Islamic bank by assets behind Bank Islam Malaysia Berhad (Bank Islam). The parties were given permission to begin merger talks by Bank Negara...

Regulators are sending a message by doing climate stress tests that using incomplete data and simple methodologies is preferable to doing nothing. Financial institutions that acknowledge that climate change is having a financial impact on them and that this will grow in the future should take the same approach.  Climate stress testing is going mainstream, with 31 regulators having completed or begun one, so banks need to keep up their work on climate-related risksFinancial institution (micro-level) climate risk metrics measure different things than regulatory (macro) climate stress t...

The Board of Executive Directors of the Islamic Development Bank (IsDB) has announced that it has approved USD 1.12 billion in financing for development projects in various sectors in 9 member countries along with USD 1.79 million in grants for various other projects including special assistance grants to Muslim communities in 3 non-member countries, during its 347th session held on the 10th of September 2022. Why it Matters?  The Board reviewed and approved projects in important industries including food security, health, transportation, energy, urban development, education, water,...

The adoption of the Accounting and Auditing Organization for Islamic Financial Institutions’ (AAOIFI) Shariah standards by the Central Bank of the United Arab Emirates (UAE) has led to changes in international Sukuk documentation linked to the Bank. The changes have witnessed some standardisation, yet the likelihood of more modifications in the near future remains uncertain and varied degrees of adaptability have been shown by investors, while the utility of the new documentation is yet to be put to test, according to Fitch Ratings. Why it Matters?  The standards&...

The Islamic Development Bank Institute (IsDBI), the knowledge subsidiary of the Islamic Development Bank Group (IsDB Group), has announced the completion of the development phase of its Islamic Finance Country Assessment Framework (IF-CAF), as per a press release issued on the 5th of September 2022. Why it Matters? The IF-CAF is a diagnostic assessment tool that examines a country's existing laws, regulations, supervision, taxation, governance, financial inclusion, and financial sector digitalisation, among other elements, to provide an early indication of its...

The government of Indonesia has raised IDR 9 trillion (USD 604.72 million) in its recent Sukuk auction, meeting its indicative target, on the 6th of September 2022, according to the country's Ministry of Finance. Why it Matters? The total amount of offers received for the Sukuk stood at IDR 24.14 trillion (USD 1.6 billion), which was less than the IDR 28.54 trillion (USD 1.9 billion) of bids obtained in the prior Sukuk auction on the 23rd of August 2022. The weighted average yields of the bulk of the offered notes were also lower than those of comparable notes sold in the pr...